Surge Still Ahead

The rush to buy sent manufacturers' sales in April smashing through their pre-recession peak, reported the Commerce Department last week. Sales reached $30.2 billion v. $29.1 billion in March, and new orders also set a record by climbing $800 million above March. For this reason--and other signs of heartiness in the economy--Commerce Department reported that the recovery is proceeding "at a better-than-seasonal pace and on a broadening scale." But it pointed out that the upward surge of the boom is still ahead: despite a 2% rise in industrial output above pre-recession highs, the rise is so far not as great as after other postwar recessions.

April contracts for future construction rose 31% over a year ago to $3.8 billion, setting a new April record. With construction contracts running 22% ahead of last year for 1959's first four months, industry leaders were upping their forecasts, now expect a gain of up to 13% over the 1958 construction total. Machine-tool orders in April rose to $53.4 million over March's $51.5 million.

The auto industry showed no signs of braking. May sales rose to an estimated 520,000 or about 4% above April. Despite a tapering-off from April, Detroit poured out 545,000 new cars in May, building up stocks in case of a steel strike. The industry estimated that cars in dealers' hands rose to 900,000, highest in three years, but carmakers did not seem worried so long as sales were still climbing. They plan no major cutback in production until the end of July. The good performance so far this year--some experts predict a 6,000,000-car year -- has not changed Detroit's view about the small car. Last week Pontiac and Oldsmobile joined the parade with plans to put out their own compact cars for the fall of 1960.

Worried that the new boom would sweep in more inflation, the Federal Reserve Board last week took an expected step. It approved a hike in the discount rate on loans to commercial banks from 3% to 3 1/2% for five member banks: New York, Chicago, St. Louis, Minneapolis and Dallas. The new discount rate is the highest since the fall of 1957, is bound to restrict even further the tightening money market. The Federal National Mortgage Association braced itself for tighter money by reducing the price it will pay for Government underwritten mortgages from 99% to 97% of face value. When money gets tight, as Fannie May knows, lenders turn in their mortgages to get the cash they need for other investments. But the hike did not faze the stock market, which has dropped more than once at such news. At week's end. it forged ahead to a new record high of 643 on the Dow-Jones industrial average.

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